From 1 July 2020, furloughed workers can return to work on a flexible basis. While employees will still be entitled to receive at least 80% of pay (subject to a cap of £2,500 per month), the Government’s contribution will be phased down from 1 August until the Scheme’s end on 31 October.
How do the flexible provisions work in practice?
There will be no minimum furlough period after 1 July, however this is subject to the employee having already been furloughed for a period of at least three consecutive weeks. It is no longer possible to furlough any employees who have not been furloughed before, unless they are returning from statutory parental leave. From 1 July, employers must bear the salary costs of any part-time hours worked by a furloughed employee, together with the associated employer’s National Insurance and minimum pension contributions. They must also fund the difference between the reducing grant and the employee’s contractual salary. From 1 August, employers cannot claim any grant in respect of employer’s National Insurance or pension contributions and from 1 September, the grant will fall to 70% (subject to a monthly cap of £2,187.50) and then 60% (subject to a monthly cap of £1,875) from 1 October.
Points to note
- Although furlough can be for any length of time, a new minimum claim period of one week will apply.
- Claim periods must begin and end in the same month, but special rules allow claims to be made for periods of less than a week at the start and end of the month (if these would otherwise be outside a claim).
- Final claims submitted for the period to 30 June may impact the size of future claims that can be made, as the number of employees that can be included in a single claim from 1 July cannot exceed the highest number of employees included in any one claim for periods up to 30 June (however this limit does not include any employees who have returned from statutory parental leave).
- There are nine documents containing detailed guidance from HMRC on how claims can be made from 1 July, but the calculation methodology is complex, containing over 30 different example calculations. Employers need to be vigilant to ensure that any claims they do make are sufficiently robust.
What should employers do now?
Employers need to identify employees who will be furloughed on or after 1 July and renegotiate furlough agreements. These agreements should deal with the new working arrangements and be recorded in writing. Employers making discretionary ‘top up’ payments should consider whether those agreements remain sustainable going forwards.
Claims for overpayments can now be made through adjustments to future claims and the new guidance confirms that HMRC will carry out additional checks where underpayments are claimed. Employers should therefore review historical claims to confirm whether they are correct.
Recent research claims that up to a third of employees have been asked to commit furlough fraud and HMRC has announced it has received 3,000 complaints so far. Indeed, our own experience suggests that some degree of abuse of the scheme is quite common. In the early days of the scheme, employers often had to submit claims on a ‘best guess’ basis due to the rapidly changing guidance and complexities of the scheme. However, we know now that HMRC intends to take a very hard line on furlough fraud. The draft Finance Bill 2020 (which is expected to pass into law in July) provides for criminal sanctions, including penalties and the possibility of custodial sanctions for the most serious fraudulent claims and deliberate non-compliance. It is key for employers check for accidental or mistaken claims, making sure paperwork (which should be retained for 5 years) is accurate and HMRC guidance is adhered too. Employers can now also repay any over claimed money via the HMRC portal.